July Employment Report Sparks Risk-On Sentiment In Markets

A general view of the trading floor in front of the DAX board at the Frankfurt stock exchange May 10, 2012. Stocks were buoyed by good news on the U.S. jobs front and respite from euro zone jitters as Spain intervenes to rescue one of its largest financial institutions. Photo: REUTERS

The U.S. government's report Friday that 163,000 jobs were created last month, far more than anticipated, sparked a risk-on sentiment among investors.

Economists were expecting between 95,000 and 100,000 jobs to have been created in July, but the surprisingly large gain appears to have stemmed largely from hiring by carmakers. Despite the monthly gain, unemployment rose in July to 8.3 percent as more Americans gave up trying to find work.

Within moments of the report's release, U.S. stock futures rose. The Dow Jones Industrial Average futures were up 0.73 percent, or less than 100 points, to 12,925 before the report; afterwards they were up 130 points to 12,961.

U.S. bank stocks also rose on the news. Bank of America Corp. (NYSE: BAC) was up 1.53 percent, compared to a nearly 1 percent prior to the unemployment data's release. JPMorgan Chase & Co. (NYSE: JPM) was up 0.77 percent before the report was released, but afterwards it climbed 1.48 percent. Citigroup Inc. (NYSE: C) was up 1.68 percent, well above its pre-report 0.88 percent gain, and Morgan Stanley (NYSE: MS), which had been up 1.3 percent, promptly climbed 2.1 percent.

In Europe, equities also responded positively to the news. Britain's FTSE 100 increased its gains to 1.55 percent from 1.46 percent, France's CAC 40 index climbed 2.6 percent from a 2.26 percent increase before the U.S. employment data was released, and Germany's main stock index increased its gains to 2.66 percent from an earlier 2.29 percent.

In Asia, stocks remained mixed after the U.S. employment report, with Tokyo's and Hong Kong's main equity indexes off and Singapore's Straits Times index up about 0.50 percent.

Safe haven assets fell after the report. Gold, which was rising before the report, trimmed gains: Before the data release the yellow metal was rising $8.60 to $1,596.40 per troy ounce; after the release it was up $1.30.

The dollar, which had been down 0.549 percent to 83 on the ICE Dollar Index before the report's release, trimmed that loss to minus 0.453 percent. The euro increased 0.65 percent from a 0.47 percent gain before the report came out.

Crude oil trading in New York was steady around $90.15 per 42-gallon barrel, an approximately 1 percent gain.

In Asia, stocks remained mixed after the U.S. employment report, with Tokyo's and Hong Kong's main equity indexes off and Singapore's Straits Times index up about 0.50 percent.